2.1 A trader received the following information regarding a European call option with a stock price...
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2.1 A trader received the following information regarding a European call option with a stock price of R145, strike price of R150, risk-free rate of 6%, stock price volatility of 25% and time to exercise of 25 weeks. The table gives the delta, gamma, vega, theta and rho for the option for a long position in one option and a short position in 10 000 options. Single option Short position in 10 000 options - 124 900 Value (R) Delta Gamma Vega (per %) Theta (per day) Rho (per %) R12.49 0.600 0.015 0.402 -0.041 0.373 - 6 000 -150 -4 020 410 -3 730 Explain what the impact will be on the option price and short position in the options for each of the following scenarios: (10) a. The stock price increases by R0.10 with no other changes (influence on option price and delta). b. The volatility increases by 0.75% with no other changes. c. The interest rate increases by 1% with no other changes. d. One day goes by without changes in the stock price or volatility. 2.1 A trader received the following information regarding a European call option with a stock price of R145, strike price of R150, risk-free rate of 6%, stock price volatility of 25% and time to exercise of 25 weeks. The table gives the delta, gamma, vega, theta and rho for the option for a long position in one option and a short position in 10 000 options. Single option Short position in 10 000 options - 124 900 Value (R) Delta Gamma Vega (per %) Theta (per day) Rho (per %) R12.49 0.600 0.015 0.402 -0.041 0.373 - 6 000 -150 -4 020 410 -3 730 Explain what the impact will be on the option price and short position in the options for each of the following scenarios: (10) a. The stock price increases by R0.10 with no other changes (influence on option price and delta). b. The volatility increases by 0.75% with no other changes. c. The interest rate increases by 1% with no other changes. d. One day goes by without changes in the stock price or volatility.
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